The farming industry tests many of your abilities beyond the act of farming itself—there’s marketing, distribution, and even disease management. Between September 26 and 30, 2023, the Sydney Rock Oyster producer and supplier East 33’s (ASX: E33) Wallis Lake operations were plagued (literally and fiscally) with ill oysters. Consequently, the Wallis Lake operations, along with the Cape Hawke and Long Island harvest areas, were shut down for precautionary testing.
With delays in reopening, the Company had to re-strategise. It undertook stock management, pushing produce from its other harvest areas, and ensuring it had enough money to go around the business.
As per its latest update, Wallis Lake has finally reopened for business. The Wallis Lake Shellfish Program and the NSW Food Authority confirmed on December 11 that all three areas are safe and open for harvest.
In October, NSW Heath and the NSW Food Authority received illness reports on oysters harvested from affected harvest areas. No oysters belonging to the Company died. However, on October 20, the NSW Food Authority informed that it would be undertaking precautionary testing of oysters in Wallis Lake over the coming days, which would involve temporarily shutting down the three harvest areas. Based on advice from the NSW Food Authority, the waterway was anticipated to reopen in early November.
But, come November, the closures continued, affecting the harvest from East 33’s farms in the area. Because of these circumstances, East 33 had to buy more third-party oysters than planned. This temporary change increased the need for working capital and decreased profit margins.
The Company then decided to prioritise the sale of stock from Port Stephens and implemented stock management to utilise the excess capacity in the infrastructure within the business’ north coast lease network.
East 33 also actively engaged with its lender, Yumbah Finance, to address any impact on East 33’s working capital requirements that this further delay in harvest may have. The Company signed a written agreement with Yumbah Finance to adjust the borrowing schedule. As per the plan, it decided to take $2 million from the remaining $7 million in the loan in November and December of 2023. The remaining $5 million will probably be borrowed in January 2024, again after sending draw notices.
At the same time as it remained shell-shocked over its lost oyster revenue, the Company got a new CEO on board on October 16, Justin Welsh. In Q1 FY24, its cash burn stood at $2.2 million, with over $3 million spent on manufacturing. East 33 ended the September quarter with $900k in cash. And though it hoped that the December quarter would have stronger results, the Wallis Lake fiasco has left things hanging in the balance.
During the closure of Wallis Lake, the Company managed with the stock from Port Stephens to enable farm oyster sales to continue during the busy Christmas period. With the lake reopened, East 33 hopes to underpin Sydney Rock Oyster supply to its distribution business to help satisfy customer demand over the summer.
Alinda is a Business Reporter for The Sentiment
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